Asian Session Forex Recap – July 19, 2016

  • RBA still waiting on more information
  • Oil prices slip on renewed supply glut concerns

Forex price action was as tight as my new pants, as a lack of major economic releases kept forex traders in the sidelines.

Major Events:

RBA meeting minutes – Looks like the Reserve Bank of Australia (RBA) also jumped on the wait-and-see bandwagon!

In its July 5 meeting minutes, the central bank revealed that it kept its interest rates steady at 1.75% mostly because it wants to wait for more data on inflation, labor market, and the housing market before making any changes. If you recall, the central bank cut its rates to a record low in May on the back of a weak quarterly CPI release.

Here are other notable points from the RBA’s release:

  • The impact of the EU referendum on Australia’s economy is likely to be small, as only 3% of Australia’s exports go to the U.K. and only 4.5% got to the rest of the EU.
  • Not much data available on Q2 2016 yet, but the early reports are consistent with growth moderating from its stronger-than-expected results in Q1 2016.
  • Commodity prices have increased since the last meeting.
  • A high exchange rate could “complicate” the adjustment of the trade sector.
  • Growth in China continues to ease, though the weaknesses in industrial activity are offset by government spending.
  • Employment growth moderated following its strong outcome in late 2015.
  • Inflation is expected to remain low for some time given the weak labor cost growth and low cost pressures in the other economies.
  • The Board is waiting on more inflation, labor market, and housing market activity reports and will update its forecasts ahead of its August policy decision.

Overall the minutes suggested that the RBA hasn’t taken another rate cut option off the table but is willing to wait for Q2 2016 reports to come in before making any changes to its policies.

Risk appetite took small hits – Risk appetite was pretty weak during the Asian session, thanks to cocktail mix of relatively flat trading in the U.S. equities, a strong yen capping the Nikkei’s gains, and lower oil prices taking its toll on the comdolls.

Australia’s ASX is down by 0.13%, the Shanghai index is down by 1.08% and Hang Seng is down by 0.60%. Meanwhile, the Nikkei is up by 1.37%, a bit lower than the previous days’ gains

Market Movers:

JPY – A bit of risk aversion and a couple of headlines suggesting that Japan doesn’t need further stimulus pushed the low-yielding yen higher in the charts.

USD/JPY is down by 41 pips (-0.39%), EUR/JPY fell 37 pips lower (-0.32%), while GBP/JPY plummeted by 86 pips (-0.61%).

AUD and NZD – The Aussie took a tumble at the release of the RBA’s meeting minutes while the Kiwi continued to weaken on the back of the news that the RBNZ is tightening its rules on housing market to pave way for a rate cut in August.

AUD/USD is down by 79 pips (-1.04%) and AUD/JPY is down by 112 pips (-1.39%) while NZD/USD is down by 84 pips (-1.18%) and NZD/JPY is down by 116 pips (-1.54%).

Watch out for:

  • 9:30 am GMT: U.K. CPI (0.4% expected vs. 0.3% previous)
  • 9:30 am GMT: U.K. core CPI (1.3% expected vs. 1.2% previous)
  • 9:30 am GMT: U.K. PPI input (0.9% expected vs. 2.6% previous)
  • 9:30 am GMT: U.K. house price index (7.9% expected vs. 8.2% previous)
  • 9:30 am GMT: U.K. retail price index expected to remain at 1.4%
  • 10:00 am GMT: German ZEW economic sentiment (8.2 expected vs. 19.2 previous)
  • 10:00 am GMT: Euro Zone ZEW economic sentiment (12.3 expected vs. 20.2 previous)

See also:

U.S. Session Recap

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